THE UNITED STATES is currently grappling to find a solution to expand prescription drug coverage to the elderly. Numerous proposals intended to broaden access for this population are under way at both the federal and state levels — and they could involve the private sector.

Seniors in the United States have long struggled to pay for outpatient prescription medications because Medicare does not typically provide outpatient prescription drug coverage in its fee-for-service plans.

With life spans lengthening, drug acquisition costs rising and incomes remaining fixed, many elderly are unable to afford outpatient prescription medications. As a result, they have been searching for ways to obtain affordable medication. This search has led to “creative” solutions.

For example, some elderly residing in border states such as Maine and Texas travel to Canadian and Mexican pharmacies to have prescriptions filled at a much lower cost. Some physicians also reportedly accept deliveries of this sort on behalf of their patients from foreign mail-order pharmacies. These actions violate the current Food and Drug Reimportation Laws concerned, in part, with adulterated drugs entering the United States. However, Congress has been demonstrating much activity and interest in the possible modification of certain aspects of this law.

The Bush Proposal

In an attempt to provide immediate relief for the elderly while Congress continues to make its own legislative proposals, the Bush administration proposed a voluntary program to take effect Jan. 1, 2002.

Under the proposal, the government would rely upon the skills and expertise of private industry to minimize administrative costs, negotiate discounted rates with drug manufacturers and manage prescription drug use. Medicare recipients could enroll in a prescription drug discount card program. They could use this discount card at participating mail and retail pharmacies to get a lower purchase price at the time of sale.

The Centers for Medicare and Medicaid Services would endorse and promote the use of prescription drug discount cards by launching a massive educational marketing campaign. The Discount Card Program would use private sector entities to offer discount drug cards and to administer the programs. The sponsoring organizations would be expected to design the features of the discount card including, but not limited to, the discount drugs and therapeutic classes available, the percent discount, the participating retail pharmacies and the program enrollment fee.

Additionally, the sponsoring organizations would be responsible for enrolling and servicing participants, including through the operation of call centers, negotiating discounts with pharmaceutical manufacturers and retail pharmacies, establishing formularies and operating mail order facilities. Sponsoring organizations offering such discount cards would receive CMS endorsement only if numerous criteria are satisfied. Those seeking to participate in the program were required to file a notification of intent with CMS by July 20.

The actual implementation and fate of the Discount Card Program, however, is unclear. The National Community Pharmacists Association and the National Association of Chain Drug Stores filed a lawsuit in federal court July 17 against CMS to prevent the Discount Card Program's implementation.

NCPA and NACDS allege CMS violated the Federal Administrative Procedures Act by conducting private negotiations with the five pharmacy benefit management companies that agreed to offer the prescription drug discount cards and exceeded its authority to create programs under the Social Security Act. A Sept. 6 hearing date was scheduled by the United States District Court of the District of Columbia to hear arguments and consider injunctive relief.

The States' Plans

Efforts to broaden access to affordable prescription medication are not limited to proposals by the federal government. A number of individual states are also developing programs to increase access. Like the Discount Card Program, some of these proposals also focus on utilizing the private sector to drive costs down.

For example, the state of Florida recently enacted a law allowing its Medicaid agency to negotiate rebates directly with pharmaceutical manufacturers in addition to the rebates required under federal law. Manufacturers must agree to pay such rebates in order to be considered for inclusion on Florida's preferred drug list or formulary.

Under this program, one manufacturer has agreed to provide disease management programs and other services in lieu of paying the rebate. The Pharmaceutical and Research Manufacturers Association of America has challenged the legality of this program.

Other states have turned to non-government third parties with expertise in managing prescription drug benefits like pharmaceutical benefit managers for assistance in increasing efficient administration of their Medicaid programs. The roles of these PBMs have ranged from negotiating a rebate agreement to broader involvement in formulary development or utilization management.

In addition, various states have formed coalitions to take advantage of bulk purchasing opportunities. Through these coalitions, states are seeking to leverage their combined collective purchasing power to bring down drug costs.

It is still unclear which of these proposals, or combination of proposals, will ultimately provide the best alternative for ensuring that elderly in the United States receive access to affordable prescription outpatient medications; however, these proposals suggest that one component of any program may likely include involvement from private industry.

A specialist in health care legislation, regulations and government relations, Cara C. Bachenheimer is an attorney with the law firm of Epstein, Becker & Green in Washington. Bachenheimer previously worked at the American Association for Homecare and the Health Industry Distributors Association. You can reach her by phone at 202/861-1825 or e-mail at cbachenheimer@ebglaw.com.

Elizabeth A. Lewis, Esq., and Wendy C. Goldstein, Esq., also contributed to this article.